Acquisition payment process

1. Acquisition/Payment Process
ACC202
Kateri Manglicmot BSIT – IV

2. The acquisition /
payment process is
most closely related
to the following
elements of the value
chain:
• Primary:
Inbound Logistics
• Support:
Procurement
Value Chain

3. 1. Request goods / services based on monitored need
• EOQ (Economic-Order-Quantity)
• Economies of Scale
2. Authorize a purchase
3. Purchase goods / services
• Purchase Order (PO)
4. Receive goods / services
• Verification
5. Disburse cash
• PO → Receiving Reports → Vendor Invoice
6. Process purchase returns as necessary
Process Steps

4. Acquisition / Payment Process
Start
End
Request Goods
/ Services
Prepare
Purchase Order
Purchase
Requisition
Purchase Order
Notify
Department
Fill
Purchase
Order
Authorize
?
Requisition
Database
No
Yes
Requesting Department Purchasing Department Vendor

5. Sales / Collection
• Take customer order
• Ship the product
• Collect payment
Compare Two Major Processes
Acquisition / Payment
• Purchase goods and services
• Receive goods and services
• Disburse cash

6. AIS Elements (Input / Output)
Purchase Requisition
• Requests that the
purchasing department
order goods / services
• Originates in an operating
department
• Terminates in the
purchasing department
Purchase Order
• Specifies items ordered,
shipping terms and other
information about the
purchase
• Originates in the
purchasing department
• Terminates with vendor
Receiving Report
• Ensures that ordered
goods have been received
in good condition
• Originates in receiving
department
• Terminates in various
departments

7. AIS Elements (Input / Output)
Vendor Invoice
• Requests payment from
buying organization
• Originates with vendor
• Terminates in accounting
department of buyer
Check
• Pays the vendor
• Originates in accounting
• Terminates with vendor

8. AIS Elements (Process)
(1)
Purchase
Requisition
(2)
Purchasing
(3)
Receiving/
Inspection
(4)
Accounts Payable
(5)
Cash Disbursements
• Six generic steps (refer
to slide 3)
• Accounting cycle steps,
including the following
journal entries:
• Purchase on
credit/cash
• Payment of inbound
freight charges
• Cash Payments
• Purchase returns as
needed

9. AIS Elements (Storage)
Mater Files
• Vendor
• Inventory
• Employee
• A/P, Cash
Transaction Files
• Purchases
• Cash Payments
Junction Files
• Purchases / Inventory
• Purchases / Cash Payments

10. • Ordering unneeded goods
• Institute a system for monitoring inventory levels.
• Require justification for unusual orders or orders over a specified dollar amount.
• Specify the business purpose for ordered goods.
• Purchasing goods from inappropriate vendors
• Develop and enforce a conflict-of-interest policy.
• Establish criteria for supplier reliability and quality goods.
• Create strategic alliances with preferred vendors.
• Receiving unordered or defective goods
• Match receiving reports with approved purchase orders.
• Inspect goods before accepting a shipment.
• Insure products en-route.
AIS Elements (Risks and Internal Controls)

11. • Experiencing theft of inventory and/or cash
• Establish an internal audit function.
• Reconcile bank statements promptly.
• Separate authorization, custody, and usage functions for both inventory and cash.
• Install employee monitoring systems.
• Bond employees who handle high-value goods.
• Making errors in paying invoices
• Additionally, many internal controls from the sales / collection process can be applied to the acquisition /
payment process.
• Inventory monitoring
• Purchase approvals
• Conflict of interest policy
• Supplier qualifications
• Strategic alliances
AIS Elements (Risks and Internal Controls)

12. • Matching the shipment with am existing purchase order.
• Requiring the receiving department to count the items received.
• Establishing responsibility for the receiving transaction by including the Employee ID in the form.
• Having one centralized location for receiving all shipments.
Internal Control of Handling Receiving
Transactions

13. References:
http://myweb.scu.edu.tw/~hankgau/Docs/AIS/IM/Ch.13%20-%20Acquisition-
Payment%20Process.pdf
http://slideplayer.com/slide/3928019/